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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File Number 001-11919

TTEC Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

84-1291044

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

9197 South Peoria Street

Englewood, Colorado 80112

(Address of principal executive offices)

Registrant’s telephone number, including area code: (303) 397-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class

Trading Symbol

Name of each exchange on which registered

Common stock of TTEC Holdings, Inc.,
$0.01 par value per share

TTEC

NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   No

As of April 28, 2022, there were 47,035,634 shares of the registrant’s common stock outstanding.

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

MARCH 31, 2022 FORM 10-Q

TABLE OF CONTENTS

Page No.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)

1

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 (unaudited)

2

Consolidated Statements of Stockholders’ Equity and Mezzanine Equity as of and for the three months ended March 31, 2022 and 2021 (unaudited)

3

Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

4

Notes to the Consolidated Financial Statements (unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31

Item 4.

Controls and Procedures

33

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 5.

Other Information

35

Item 6.

Exhibits

35

SIGNATURES

37

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in thousands, except share amounts)

(Unaudited)

March 31,

December 31,

 

    

2022

    

2021

 

ASSETS

Current assets

Cash and cash equivalents

$

156,828

$

158,205

Accounts receivable, net of allowance of $5,032 and $5,409, respectively

 

399,160

 

357,310

Prepaids and other current assets

 

153,457

 

134,333

Income and other tax receivables

43,248

48,139

Total current assets

 

752,693

 

697,987

Long-term assets

Property, plant and equipment, net

 

168,717

 

168,404

Operating lease assets

96,995

90,180

Goodwill

 

739,531

 

739,481

Deferred tax assets, net

 

15,163

 

11,130

Other intangible assets, net

 

202,609

 

212,349

Other long-term assets

 

75,977

 

77,273

Total long-term assets

 

1,298,992

 

1,298,817

Total assets

$

2,051,685

$

1,996,804

LIABILITIES AND STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Current liabilities

Accounts payable

$

78,001

$

70,415

Accrued employee compensation and benefits

 

166,095

 

156,324

Other accrued expenses

 

74,786

 

63,369

Income tax payable

 

12,207

 

9,471

Deferred revenue

 

92,852

 

95,608

Current operating lease liabilities

43,344

44,460

Other current liabilities

4,599

4,749

Total current liabilities

 

471,884

 

444,396

Long-term liabilities

Line of credit

 

803,000

 

791,000

Deferred tax liabilities, net

 

4,996

 

5,335

Non-current income tax payable

17,486

17,486

Non-current operating lease liabilities

70,140

64,419

Other long-term liabilities

 

75,687

 

79,827

Total long-term liabilities

 

971,309

 

958,067

Total liabilities

 

1,443,193

 

1,402,463

Commitments and contingencies (Note 9)

Redeemable noncontrolling interest

 

56,666

 

56,316

Stockholders’ equity

Preferred stock; $0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of March 31, 2022 and December 31, 2021

 

 

Common stock; $0.01 par value; 150,000,000 shares authorized; 47,035,634 and 46,990,031 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

 

470

 

470

Additional paid-in capital

 

362,601

 

361,135

Treasury stock at cost: 35,016,619 and 35,062,222 shares as of March 31, 2022 and December 31, 2021, respectively

 

(596,279)

 

(597,031)

Accumulated other comprehensive income (loss)

 

(97,464)

 

(98,426)

Retained earnings

 

865,951

 

856,065

Noncontrolling interest

 

16,547

 

15,812

Total stockholders’ equity

 

551,826

 

538,025

Total liabilities and stockholders’ equity and mezzanine equity

$

2,051,685

$

1,996,804

The accompanying notes are an integral part of these consolidated financial statements.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands, except per share amounts)

(Unaudited)

Three months ended March 31,

 

    

2022

    

2021

 

Revenue

$

588,726

$

539,219

Operating expenses

Cost of services (exclusive of depreciation and amortization presented separately below)

 

447,215

 

388,660

Selling, general and administrative

 

64,839

 

52,757

Depreciation and amortization

 

26,630

 

20,459

Restructuring charges, net

620

402

Impairment losses

 

1,112

 

3,517

Total operating expenses

 

540,416

 

465,795

Income from operations

 

48,310

 

73,424

Other income (expense)

Interest income

 

200

 

179

Interest expense

 

(3,766)

 

(1,802)

Other income (expense), net

 

1,260

 

(798)

Total other income (expense)

 

(2,306)

 

(2,421)

Income before income taxes

 

46,004

 

71,003

Provision for income taxes

 

(8,034)

 

(15,979)

Net income

 

37,970

 

55,024

Net income attributable to noncontrolling interest

 

(4,566)

 

(4,606)

Net income attributable to TTEC stockholders

$

33,404

$

50,418

Other comprehensive income (loss)

Net income

$

37,970

$

55,024

Foreign currency translation adjustments

 

296

 

(5,753)

Derivative valuation, gross

 

849

 

(3,665)

Derivative valuation, tax effect

 

(220)

 

951

Other, net of tax

 

41

 

36

Total other comprehensive income (loss)

 

966

 

(8,431)

Total comprehensive income (loss)

 

38,936

 

46,593

Less: Comprehensive income attributable to noncontrolling interest

 

(3,615)

 

(3,034)

Comprehensive income (loss) attributable to TTEC stockholders

$

35,321

$

43,559

Weighted average shares outstanding

Basic

 

47,005

 

46,743

Diluted

47,381

 

47,355

Net income per share attributable to TTEC stockholders

Basic

$

0.71

$

1.08

Diluted

$

0.71

$

1.06

Dividends declared and not paid per share outstanding

$

0.50

$

0.43

The accompanying notes are an integral part of these consolidated financial statements.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity and Mezzanine Equity

(Amounts in thousands)

(Unaudited)

Three months ended March 31, 2021 and 2022

Stockholders’ Equity of the Company

 

    

    

    

    

    

    

    

    

    

Accumulated

    

    

    

    

    

    

 

Other

 

Common Stock

Treasury

Additional

Comprehensive

Retained

Noncontrolling

Mezzanine

 

Shares

Amount

Stock

Paid-in Capital

Income (Loss)

Earnings

interest

Total Equity

Equity

 

Balance as of December 31, 2020

 

46,737

$

467

$

(601,214)

$

360,293

$

(72,156)

$

757,312

$

13,060

$

457,762

$

52,976

Net income

 

 

 

 

 

50,418

 

2,908

 

53,326

1,698

Dividends to shareholders ($0.43 per common share)

 

 

 

 

 

(20,132)

(20,132)

Dividends distributed to noncontrolling interest

 

 

 

 

 

 

 

(2,385)

 

(2,385)

Foreign currency translation adjustments

 

 

 

 

 

(5,879)

 

 

126

 

(5,753)

Derivatives valuation, net of tax

 

 

 

 

 

(2,714)

 

 

 

(2,714)

Vesting of restricted stock units

 

82

 

1

 

1,363

 

(5,291)

 

 

 

 

(3,927)

Equity-based compensation expense

 

 

 

 

4,028

 

 

 

 

4,028

Other, net of tax

 

 

 

 

 

36

 

 

 

36

Balance as of March 31, 2021

 

46,819

$

468

$

(599,851)

$

359,030

$

(80,713)

$

787,598

$

13,709

$

480,241

$

54,674

Stockholders’ Equity of the Company

 

    

    

    

    

    

    

    

    

    

Accumulated

    

    

    

    

    

    

 

Other

 

Common Stock

Treasury

Additional

Comprehensive

Retained

Noncontrolling

Mezzanine

 

Shares

Amount

Stock

Paid-in Capital

Income (Loss)

Earnings

interest

Total Equity

Equity

 

Balance as of December 31, 2021

 

46,990

$

470

$

(597,031)

$

361,135

$

(98,426)

$

856,065

$

15,812

$

538,025

$

56,316

Net income

 

 

 

 

 

 

33,404

 

3,611

 

37,015

955

Dividends to shareholders ($0.50 per common share)

 

 

 

 

 

(23,518)

(23,518)

Dividends distributed to noncontrolling interest

 

 

 

 

 

 

 

(2,880)

 

(2,880)

(605)

Foreign currency translation adjustments

 

 

 

 

 

292

 

 

4

 

296

Derivatives valuation, net of tax

 

 

 

 

 

629

 

 

 

629

Vesting of restricted stock units

 

46

 

 

752

 

(2,273)

 

 

 

 

(1,521)

Equity-based compensation expense

 

 

 

 

3,739

 

 

 

 

3,739

Other, net of tax

 

 

 

 

 

41

 

 

 

41

Balance as of March 31, 2022

 

47,036

$

470

$

(596,279)

$

362,601

$

(97,464)

$

865,951

$

16,547

$

551,826

$

56,666

The accompanying notes are an integral part of these consolidated financial statements.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

Three Months Ended March 31,

    

2022

    

2021

    

Cash flows from operating activities

Net income

$

37,970

$

55,024

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

26,630

 

20,459

Amortization of contract acquisition costs

 

350

 

176

Amortization of debt issuance costs

 

265

 

175

Imputed interest expense and fair value adjustments to contingent consideration

 

 

877

Provision for credit losses

 

(185)

 

21

(Gain) loss on disposal of assets

 

360

 

46

Impairment losses

1,112

3,517

Deferred income taxes

 

(4,679)

 

(1,090)

Excess tax benefit from equity-based awards

 

(507)

 

(1,775)

Equity-based compensation expense

 

3,739

 

4,028

(Gain) loss on foreign currency derivatives

 

50

 

61

Changes in assets and liabilities, net of acquisitions:

Accounts receivable

 

(41,128)

 

27,053

Prepaids and other assets

 

(8,321)

 

(22,669)

Accounts payable and accrued expenses

 

17,518

 

15,972

Deferred revenue and other liabilities

 

(19,488)

 

(32,088)

Net cash provided by operating activities

 

13,686

 

69,787

Cash flows from investing activities

Proceeds from sale of long-lived assets

 

7

 

25

Purchases of property, plant and equipment, net of acquisitions

 

(16,691)

 

(11,565)

Acquisitions, net of cash acquired of zero and zero, respectively

 

 

(267)

Net cash used in investing activities

 

(16,684)

 

(11,807)

Cash flows from financing activities

Net proceeds (borrowings) from line of credit

 

12,000

 

(46,000)

Payments on other debt

 

(1,242)

 

(1,871)

Payments of contingent consideration and hold-back payments to acquisitions

 

(9,600)

 

Dividends paid to shareholders

Payments to noncontrolling interest

(3,485)

(2,385)

Tax payments related to issuance of restricted stock units

(1,521)

(3,927)

Payments of debt issuance costs

 

 

Net cash used in financing activities

 

(3,848)

 

(54,183)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(1,629)

 

(2,576)

(Decrease) increase in cash, cash equivalents and restricted cash

 

(8,475)

 

1,221

Cash, cash equivalents and restricted cash, beginning of period

 

180,682

 

159,015

Cash, cash equivalents and restricted cash, end of period

$

172,207

$

160,236

Supplemental disclosures

Cash paid for interest

$

3,468

$

1,576

Cash paid for income taxes

$

3,305

$

4,275

Non-cash investing and financing activities

Acquisition of long-lived assets through finance leases

$

202

$

137

Acquisition of equipment through increase in accounts payable, net

$

691

$

(3,431)

Dividend declared but not paid

$

23,518

$

20,132

The accompanying notes are an integral part of these consolidated financial statements.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1)OVERVIEW AND BASIS OF PRESENTATION

Summary of Business

TTEC Holdings, Inc. (“TTEC”, “the Company”; pronounced “T-TEC”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s most iconic and disruptive brands. TTEC designs, builds, orchestrates, and delivers seamless digitally enabled customer experiences that are designed to increase brand value, customer loyalty, revenue and profitability through personalized, outcome-based interactions. The Company helps clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless customer experience (“CX”) across different channels and phases of the customer lifecycle. TTEC’s 62,000 employees serve clients in the automotive, communication, financial services, national/federal and state and local governments, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries via operations in the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom.

The Company operates and reports its financial results of operation through two business segments: TTEC Digital and TTEC Engage.

TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.
TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, content moderation, and fraud management services.

TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify® CXaaS, which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences. Our Humanify® cloud platform provides a fully integrated ecosystem of CX offerings, including messaging, AI, machine learning, robotic process automation, analytics, cybersecurity, CRM, knowledge management, journey orchestration, and traditional voice solutions. Our end-to-end CXaaS platform differentiates us from competitors by combining design, strategic consulting, technology, data analytics, process optimization, system integration, and operational excellence along with our decades of industry know-how. This unified offering is value-oriented, outcome-based and delivered to large enterprises, governments, and hypergrowth companies on a global scale.

Basis of Presentation

The Consolidated Financial Statements are comprised of the accounts of TTEC, its wholly owned subsidiaries, its 55% equity owned subsidiary Percepta, LLC, its 70% equity owned subsidiary First Call Resolution, LLC and its 70% equity owned subsidiary Serendebyte, Inc. (see Note 2). All intercompany balances and transactions have been eliminated in consolidation.

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Notes to Consolidated Financial Statements

(Unaudited)

The unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company and the consolidated results of operations and comprehensive income (loss) and the consolidated cash flows of the Company. All such adjustments are of a normal, recurring nature. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, litigation reserves, restructuring reserves, allowance for credit losses, contingent consideration, redeemable noncontrolling interest, and valuation of goodwill, long-lived and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash, primarily held in interest-bearing investments, and liquid short-term investments, which have original maturities of less than 90 days. Restricted cash includes cash whereby the Company’s ability to use the funds at any time is contractually limited or is generally designated for specific purposes arising out of certain contractual or other obligations.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets that sum to the amounts reported in the Condensed Consolidated Statement of Cash Flows (in thousands):

March 31, 2022

    

December 31, 2021

Cash and cash equivalents

$

156,828

 

$

158,205

Restricted cash included in "Prepaid and other current assets"

 

15,379

 

22,477

Total

$

172,207

 

$

180,682

Concentration of Credit Risk

The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide services and as necessary through the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the Company diversifies its activities across eight investment-grade financial institutions.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which now requires the acquirer to account for revenue contracts in accordance with Topic 606 as if it had acquired the contract, versus recording these assets and liabilities at fair value on acquisition date. The ASU is effective for interim and annual periods beginning on or after December 15, 2022, with early adoption permitted. The Company adopted the new guidance during the fourth quarter of 2021 which required application to all acquisitions completed during the adoption year. See further discussion in Note 2.

Other Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform” (Topic 848), which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the anticipated cessation of the London Interbank Offered Rate (”LIBOR”). The ASU is effective from March 12, 2020, may be applied prospectively and could impact the accounting for LIBOR provisions in the Company’s credit facility agreement. In addition, in January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform – Scope,” which clarified the scope of ASC 848 relating to contract modifications. The Company has not yet adopted the standard but does not expect that the adoption of this guidance will have a material impact on the Company’s financial position, results of operations or cash flows.

(2)ACQUISITIONS AND DIVESTITURES

Avtex

On April 8, 2021, the Company acquired, through its subsidiary TTEC Digital, LLC, 100% of the outstanding stock of Avtex Solutions Holdings, LLC (“Avtex”). Avtex is an end-to-end customer experience and CXaaS solutions provider with offerings in Genesys and Microsoft cloud solutions. The business is operated as part of the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC.

Total cash paid at acquisition was $499.946 million ($490.0 million base purchase price plus cash, less debt and working capital estimate). The Avtex transaction is subject to customary representations and warranties, holdbacks, and a net working capital adjustment. The Company used cash from operations and drew down on its Credit Facility to fund the acquisition. The Company finalized the net working capital adjustment for $0.1 million during the third quarter of 2021 which was paid by Avtex to the Company in the third quarter of 2021.

During the fourth quarter of 2021, TTEC implemented ASU 2021-08 which required an accounting modification to the deferred revenue balance as of the acquisition date (see discussion above in Note 1). The deferred revenue balance was evaluated as if TTEC had been the company securing the initial contract and accounted for these contracts in accordance with ASC 606. Based on this re-assessment, the $4.9 million reduction initially recorded to deferred revenue in connection with the purchase price accounting was eliminated and an offsetting increase to Goodwill was recorded as of the acquisition date. In connection with this modification, revenue of $3.4 million was recorded in the fourth quarter of 2021 related to deferred revenue from the second and third quarters of 2021.

A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset. The significant assumptions utilized in calculating the fair value of the customer relationships intangible asset were the customer attrition rate, revenue growth rates, forecasted EBITDA, contributory asset charge, and the discount rate.

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Notes to Consolidated Financial Statements

(Unaudited)

The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

Acquisition Date

 

Fair Value

 

Cash

$

18,638

Accounts receivable, net

 

22,214

Prepaid expenses

 

26,389

Current income tax receivables

 

93

Net fixed assets

3,162

Right of use assets

3,614

Other Assets

480

Tradename

5,300

Intellectual property intangible

770

Customer relationships

 

128,200

Goodwill

378,882

$

587,742

Accounts payable

$

20,580

Accrued employee compensation

 

4,325

Accrued expenses

 

250

Right of use liability - current

678

Deferred revenue

56,765

Accrued income taxes

332

Deferred tax liability

1,930

Right of use liability - noncurrent

 

2,936

$

87,796

Total purchase price

$

499,946

In the first quarter of 2022, the Company finalized the valuation of Avtex for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.

The Avtex customer relationships, intellectual property intangible, and tradename are being amortized over useful lives of 9, 3, and 1 years, respectively. The goodwill recognized from the Avtex acquisition is attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be materially deductible for income tax purposes. The acquired goodwill and intangibles and operating results of Avtex are reported within the TTEC Digital segment from the date of acquisition.

Financial Impact of Acquired Businesses

The acquired business purchased in 2021 noted above contributed revenues of $53.4 million and net income $2.8 million, to the Company for the quarter ended March 31, 2022.

The unaudited proforma financial results for the three months ended March 31, 2021, combines the consolidated results of the Company and Avtex assuming the acquisition had been completed on January 1, 2020. The reported revenue and net income of $539.2 million and $50.4 million would have been $586.2 million and $53.6 million for the three months ended March 31, 2021, respectively, on an unaudited proforma basis.

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Notes to Consolidated Financial Statements

(Unaudited)

The Company did not have any material, nonrecurring proforma adjustments directly attributable to the business combination included in the reported proforma revenue earnings. These proforma amounts have been calculated after applying the Company’s accounting policies and adjusting the respective acquired businesses’ results to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment, and intangible assets had been applied from the date indicated, with the consequential tax effects.

The unaudited proforma consolidated results are not to be considered indicative of the results if this acquisition occurred in the periods mentioned above, or indicative of future operations or results. Additionally, the proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition.

Subsequent Event

Certain Assets of Faneuil

On April 1, 2022, the Company completed an asset acquisition through its subsidiary TTEC Government Solutions LLC, of certain public sector citizen experience contracts in the transportation infrastructure and healthcare exchange industries from Faneuil, Inc., a subsidiary of ALJ Regional Holdings, Inc. The business will operate as part of the TTEC Engage segment and will be fully consolidated into the financial statements of TTEC. The Faneuil acquisition will be recorded as a business combination under ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values as of the acquisition date.

Total cash paid at acquisition was $142.3 million less customary hold-backs related to representations and warranties, plus certain future contingent payments and customary adjustments. In addition, Faneuil agreed to grant to TTEC Government Solutions LLC a three-year call right and right of first offer to purchase certain other assets of Faneuil in its utilities and commercial healthcare verticals, and certain proprietary technology. The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time since the acquisition date and the ongoing status of the valuation. Therefore, it is impracticable for the Company to provide the major classes of assets acquired and liabilities assumed or proforma revenue and earnings.

(3)SEGMENT INFORMATION

The Company reports the following two segments:

TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.

Technology Services: Our technology services design, integrate, and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity.
Professional Services: Our management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services.

TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including AI operations, content moderation, and fraud management services.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Customer Acquisition, Growth, and Retention Services: Our customer growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that we believe increase the quantity and quality of leads and customers.
Customer Care, Tech Support, and Order Fulfillment Services: Our customer care, technical support, and order fulfillment services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints. 
Digitally Enabled Back Office and Specialty Services: Our digital AI operations, content moderation, and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud.

The Company allocates to each segment its portion of corporate operating expenses. All intercompany transactions between the reported segments for the periods presented have been eliminated.

The following tables present certain financial data by segment (in thousands):

Three Months Ended March 31, 2022

    

    

    

    

Depreciation

    

Income

 

Gross

Intersegment

Net

&

from

 

Revenue

Sales

Revenue

Amortization

Operations

 

TTEC Digital

$

113,583

$

$

113,583

$

9,412

$

6,347

TTEC Engage

 

475,143

 

 

475,143